How Ahmed Fahour delivered Australia Post back into the black

The $126 million profit unveiled by Australia Post last week should have been the crowning glory in Ahmed Fahour's legacy as CEO.

Just two years ago, Post lost $222 million, and its losses were projected to blow out to a $6.6 billion disaster for taxpayers. But by making unpopular decisions, including job cuts, price hikes and reductions in service, Fahour was about to right the ship. Arguably, his reforms helped to save as many as 10,000 jobs, as the former NAB banker turned his posties into parcel delivery people.

The departed CEO leaves the business in good shape and deserves credit for building one of the most profitable parcel businesses in the world during the past seven years in a highly competitive market against giants like DHL, FedEx and the Japan Post-owned Toll.

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He lifted the proportion of revenue from e-commerce from 45 per cent to 70 per cent between 2010 and 2016. The three-fold increase in profit unveiled last week was the result of pivoting the business away from letters. Indeed, the latest numbers revealed the full extent of the crisis Fahour faced – a 5 per cent increase in profit for parcels versus a 60 per cent fall for the letters business which plunged further into the red.

Delivering Post's bottom line back into the black is a remarkable turnaround story that should have secured Fahour a spot in Australia's corporate Hall of Fame alongside the likes of Qantas CEO Alan Joyce.

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Instead, the outgoing Fahour received faint praise from Post chairman John Stanhope and again made headlines for all the wrong reasons, his $10.8 million final payout coming on top of last year's $5.6 million salary, which sparked criticism from Prime Minister Malcolm Turnbull and led to his resignation.

Mixed legacy

AFR Weekend has spoken – on and off the record – to several people who know, worked or closely observed Fahour. Their verdict is Fahour earned his pay by turning Post around and has set the business up for a possible lucrative privatisation. However, his high CEO pay, union deals, repeated restatement of the accounts and personal style leave questions about his legacy.

"He has transitioned that business away from a declining and loss-making sector being its traditional market and created new e-commerce and lines of business which delivered profits accordingly. But his personal style has had a dramatic impact on how he is judged by the community and the media," head of consultancy BrandMatters Paul Nelson says.

"He is seen as a pretty hard-headed banker that was working for a people-focused business built around the feel-good factor of your local friendly postie and a sense of nostalgia and he took a very different view around KPIs and the numbers. I think his personal style has taken away from the emotional appeal of the brand and a pretty positive set of numbers driven by his innovation."

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A string of high-profile executive departures during his reign – including now REA Group CEO Tracey Fellows, the now Myer CEO Richard Umbers, Fahour's right-hand man Ewen Stafford and head of HR Catherine Walsh – also leave questions about Fahour's robust management style.

"People will often draw dots like me leaving ... Ahmed is a strong leader but he is an inspirational leader. But don't get me wrong, like any boss you have your moments when every conversation isn't perfect," Fellows told AFR Weekendat the time of her departure.

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A natural deal-maker and media operator, Fahour's larger than life persona was on display when he resigned in February in the wake of his $5.6 million salary. While most CEOs might have gone quietly, Fahour used his press conference to take aim at critic Senator Pauline Hanson, claiming that running Post is a lot harder than running a fish and chip shop. He then appeared on Channel Ten's The Project to ask if she had "an issue with the colour" of his skin. The story was no longer about Post and Fahour's pay but the pair's racial feud.

Change agent

Fahour's high-octane style – cited when he was passed over as NAB CEO and which scuttled speculation about him being appointed CEO of Telstra, Qantas and most recently head of Amazon Australia and CBA – was the main reason he was chosen for the Post job, with former chairman David Mortimer recognising the organisation needed a major shake-up.

Ahmed Fahour has taken an extended holiday overseas after leaving Post and the controversy over his pay. David Rowe

"We felt he was right. To be a change agent you need to be a little more daring," Mortimer previously told AFR Weekend about why he chose Fahour.

Fahour, who had already cemented his reputation as a change agent running NAB's Australian operations, said Post's board sat him down and told him: "We are a 200-year-old business and we are potentially facing extinction. Our core mail business is dying and we need to reinvent ourselves."

Fahour, who has always had strong political connections, persuaded Parliament to allow him to hike the price of stamps from 60¢ to 70¢ then up to $1. He also got approval to introduce a controversial two-speed mail service and cut 2000 jobs. This year he struck a deal to sell the Sydney GPO to two Singaporean billionaires for $150 million to help boost the turnaround. They are changes that have put Post back in the black but have hurt public goodwill.

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"Many organisations have gone from a loss of $220 million to a sustainable profit of $50 million-$120 million, without the statutory protection Post has to protect it," Australian Human Resources Institute Peter Wilson says. "Yes the basic letter traffic was in trouble, but all of Australian retailing is dealing with a comparable situation and is unable to nearly double its prices to respond."

Confusing accounts

The Communications, Electrical and Plumbing Union claims the numbers were stacked to make the 2015 loss look worse than it was (the three years before Post made a profit of $281 million, $177 million and $116 million). The result included a $190 million provision for redundancies and other restructuring costs. Fahour had his old employer Boston Consulting prepare a report for then Communications Minister Mr Turnbull; it projected Post's losses would grow to $12 billion for letters and $6.6 billion overall within a decade to help make the case.

Analysis of the accounts undertaken for Chanticleer by William Ammentorp, a former banking analyst and funds manager who now manages his own investments, showed that Fahour restated the accounts 49 times, compared to just once in the five years before his appointment. While the restatements did not impact the overall bottom-line, they did make the letters business look worse and strengthened Fahour's public case for reform.

Whatever the truth about the extent of the turnaround, Post has now returned to profit and pay expert John Egan believes Fahour earned his pay.

"I am less concerned about an appropriately talented, experienced, dedicated and focused executive being paid $6 million, reflecting the outcome of a five to seven-year long-term incentive plan, who is able to contribute an improved position for the government in the order of $350 million – albeit with some bumps along the way, – than government entering into contracts for infrastructure and revealing to taxpayers they have underestimated the project in excess of $1 billion, $5 billion or $10 billion," Egan says.

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Fahour should be remembered for putting Post back into the black. But the corporate pendulum has swung away from results alone to a focus on culture, behaviours and achieving sustainable, long-term outcomes with a zero tolerance for corporate largesse.

Culture and behaviours

Boards say that switch began with the resignation of former Orica CEO Ian Smith amid bullying claims two years ago. This year it has played out with the pending departure of Commonwealth Bank CEO Ian Narev despite record bank profits. Seven West Media CEO Tim Worner has kept his job but lost his bonus in the wake of his affair and the resignation of CPA CEO Alex Malley has put the focus on CEOs' personal values.

The blocking of former Origin CEO Grant King to the BHP Billiton board has reinforced that investors are in no mood for leniency.

Fahour made good in-roads on gender diversity and engaging his older workers but as always, controversy was never far away. He famously took 78 people to the 2012 London Olympics as a guest of Post, costing the business $2.5 million in airfares, tickets, meals and ­accommodation.

Post chairman Stanhope admits that Post's new CEO Christine Holgate will be chalk and cheese in style to Fahour. Holgate – who is being paid much less than half of what Fahour was – says "pay has never been a driver for her" and this month she flies to Bhutan to help out at a Buddhist temple in the high mountains "to clear the white board" before she starts.

Legacy plays out

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One reason experts say Fahour's $35 million over seven years never passed the pub test is that Fahour has already walked away with the money while an ongoing court case and questions about the accounts play out.

Former Australia Post CEO Ahmed Fahour loves new technology and said drones and driverless trucks will transform Australian business. Eddie Jim

"The financial performance has been very good. Whether Ahmed has brought his stakeholders with him on that journey is a question mark. What has he done in a broader sense on social responsibility and giving back, has the brand lost its emotional appeal and what has happened in the workplace environment?" Nelson asks.

"There is also a question about whether the results are sustainable. In these large organisations, we won't know for three to five years, the full reputational impact of the work he has done and whether it has been a success, but he has already left the building with the money."

"Most top 50 companies, and a growing proportion of smaller ASX-listed companies, now require long-term incentives to remain on foot after an executive leaves," he says. "It is in the executive's interests to ensure they leave behind a sound legacy."

Fahour has now joined BCG Digital Ventures as non-executive chairman for Asia. But he has stood down as chairman of LaunchVic and come off the board of his beloved Carlton Football Club, leaving more time for self-reflection. The prolific tweeter has been highlighting passages from Matthew Kelly's The Rhythm of Life and quoting philosopher Wayne Dyer and Buddha on staying positive.

"The only limits you have are the limits you believe," Fahour recently tweeted from a Dyer quote.

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Christine Holgate, Australia Post CEO, will have to deal with a Comcare investigation and Federal Court case in relation to the allegations of fraud, union corruption and collusion in running Post's workers' compensation scheme during Ahmed Fahour's tenure. David Rowe

Incoming Post CEO Christine Holgate will have her pay capped at $1.37 million by the Remuneration Tribunal. Ben Rushton